When the Central Government, the provincial Governments and merchants in all parts of the country accepted paper as money, there was nothing to prevent the free circulation of every note put into circulation by the banks. If the original intention of the banks or provincial Governments was to cheat the public, they might have issued much more paper than they did. Besides, neither Chinese bankers nor the Government understood the absolute necessity of redeeming the notes on demand; but they knew full well that to meet these notes in silver, whenever they were presented, was the best policy. They knew also that just as it was easy to obtain the confidence of the public in these notes it would be quite as easy to make the public lose confidence in them.* Two or three postponements or temporary refusals to cash them would probably prove sufficient in a country like China to stop people from accepting any more of these notes as money. Such a position, they knew, might also result in endangering the very existence of the banks concerned. We thus see the consideration which prompted the bankers to refrain from issuing further quantities of these notes - especially as, with the aid of the printing press, they might have issued notes to any amount. The regular native banks constituted a sort of a check on the haphazard procedure of the official banks. We know that the former almost despised the official banks for having had to take recourse to the use of paper as money; although they took the notes of the latter for short periods, mainly with the view to facilitate business, they always exchanged them for silver at the bank of issue; moreover the native banks never paid out sums due by them in any shape, except those of sycee or silver coins. The official banks had to keep face, especially as the public was aware of the procedure of the native banks. Consequently, the official banks had to pay out in silver occasionally; they generally compromised by paying out a certain proportion in silver and the balance in paper, in all their transactions. Even amongst these banks, the bank that paid the larger proportion in silver commanded larger credit and better respect than the one which paid a larger proportion in paper. Thus it was that while there was no lawful check on the issue of paper by the banks, the evil of the unrestricted issue was to a large extent minimized. In spite of all this there were several breakdowns due to the inability of the banks to meet paper with silver. As years progressed, the difficulty still further increased, in view of some of the less reputable native banks following in the wake of the official banks in making unrestricted paper issues. The foreign merchants and the Chambers of Commerce in China were really alarmed at the pace with which these banks were going and requested the Government to take steps to regulate, if not altogether stop, the circulation and issue . of paper by private or semi-official banks. Things were really in a very dangerous state when the whole problem was effectively solved all of a sudden. The banking crisis which followed in the wake of the revolution of 1911 made all paper money issued by Chinese banks absolutely valueless. From thence people would look at nothing but silver, or paper which had the authority of the Government at Peking. The Taching Bank or what is now known as the Bank of China, and the Bank of Communications were the only institutions whose note issues were fully redeemed; and the notes of these banks were considered absolutely good. The Bank of China regulated its issue according to the state of its silver reserves.

* It is doubtful, however, whether all provinces understood this; but they were checked by finding that the notes came back to them quickly. At Wuchang they were certainly never cashable in silver by the man in the street, and even foreign banks had to wait some days to get sycee for them.